Volatility Based > Volatility

The Volatility indicator calculates and plots a smoothed average of the True Range. True Range measures the conventional range of a bar but checks the previous bar’s closing price to see if it is outside the current bar’s range. If it is, then that closing price is used instead of the high or low. That is, the previous bar’s close is considered part of the current bar’s range. This helps account for gaps between bars.

Usage:

This indicator may be considered a tool for measuring the volatility of a market using a price range concept. Often, extremes in Volatility are associated with a change in character of a market, from trending to trading range and vice versa. (This volatility calculation, based on True Range, returns a value in points. Volatility calculations associated with options trading return a value in percent.)